Expiration-the Saturday following the third Friday of the month at 11:59 P.M. Final trades may be completed until 4:00 P.M. on the day preceding expiration.

Settlement - next business day; stock delivered as the result of an option's exercise is settled on a regular way basis (three business days).

Position Limits - a maximum of 250,000 contracts on the same side of the market. Limits apply to individuals, registered representatives acting for discretionary accounts and individuals acting together as one person.

Options Clearing Corporation (OCC) - owned by the exchanges that trade options, the OCC is the clearing agent for listed options contracts. Its objectives are to standardize, guarantee the performance of and issue option contracts. It determines when new contracts should be offered and designates the strike prices and expiration months for new contracts

Open Interest - the number of contracts outstanding. The higher the open interest, the more liquid the option is. Open interest tends to decline as a contract approaches expiration as investors either close out or exercise their positions.

ii. Long-Term Equity Anticipation Securities (LEAPS®) - these are essentially long term options with terms to expiration of up to thirty nine months. The tax rules are somewhat unique in that LEAPS® writers must report short-term capital gains at expiration, irrespective of how long investors may have held the contracts. LEAPS® buyers may report long-term losses

iii. Futures/Forwards - these are contracts between two parties where one agrees to purchase from the other an underlying asset at a future date at a price upon which both parties have agreed in the present. Futures contracts are standardized as to terms and trade on an exchange, whereas forwards are bespoke for the situation to which they apply and are unregulated.

Purchase requires a margin account with an initial deposit (initial margin) and required minimum balance (maintenance margin). Contracts are marked to market and settled daily. Contract value increases allow the contract holder to withdraw the increase in the margin account; value decreases below the maintenance margin require restoration to the initial margin, not maintenance margin (the latter is the requirement of stock accounts). Commodity exchanges set margin requirements.

The futures price will converge with the spot (current) price, the closer the delivery date is. The daily limit is the maximum change permitted in a commodity's price during a trading day. Open interest is the number of contracts outstanding for a particular futures contract.

Uses of futures contracts

Hedging - taking an offsetting futures position from the current position in a particular underlying item. If one owns the items s/he would sell the contract; if s/he was short the item, s/he would purchase the contract.

Leverage - a small initial deposit can control a large amount of money. For example, initial margin is $10,000 to control $1 million in treasury bills. If the bills experience a 1% price increase, such increase would result in a $10,000 increase in the value of the contract or a 100% increase over the initial margin amount.